Comprehensive annual financial report for fiscal year ended ...

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Regional Transportation Authority

Comprehensive

Annual Financial Report

December 31, 1990

!(!i 1 8 i991

Deloitte &
Touche

IRAN
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4491. C4

3 5556 020 273 181

TABLE OF CONTENTS

INDEPENDENT AUDITORS' REPORT 1

GENERAL PURPOSE FINANCIAL STATEMENTS:

Combined Balance Sheet 3

Combined Statement of Revenues, Expenditures

and Changes in Fund Balances 5

Combined Budgetary Basis Statement of Revenues

and Expenditures 7

Statement of Revenues, Expenses and Changes in

Retained Earnings 9

Statement of Cash Hows 10

NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS 11

SUPPLEMENTAL INFORMATION:

Statement of Changes in General Fund Balance 27

Statement of Changes in Assets and Liabilities of the

Agency Fund 28

Combining Statement for Debt Service Fund 29

STATISTICAL SECTION

Statement of Revenues and Expenditures

for All Funds 30

Sales Tax Revenues Source by County/

City of Chicago 31

Retailers' Occupation and Use Tax (Sales Tax)

Revenues by County 31

Distribution of Revenues/Distribution of Expenses 31

Service Division Operating Characteristics 32

Allocation of Capital Funds to Northeast Illinois 32

System Ridership 33

Unlinked Passenger Trips 33

Legal Debt Capacity 34

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Deloitte &
Touche

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Two Prudential Plaza Telephone (31 2) 946-3000

180 North Stetson Avenue Telecopier (312)946-2600
Chicago, Illinois 60601 -6779

INDEPENDENT AUDITORS^ REPORT

Board of Directors

Regional Transportation Authority

Chicago, Illinois

We have audited the general purpose financial statements of
the Regional Transportation Authority (Authority) as of and
for the year ended December 31, 1990, as listed in the table
of contents. These financial statements are the
responsibility of the Authority's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted
auditing standards and "Government Auditing Standards," issued
by the Comptroller General of the United States. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the general purpose financial statements
referred to above present fairly, in all material respects,
the financial position of the Regional Transportation
Authority at December 31, 1990, and the results of its
operations and the cash flows of its proprietary fund for the
year then ended in conformity with generally accepted
accounting principles.

Member

DRTlnternational

Our audit was conducted for the purpose of forming an opinion
on the general purpose financial statements of the Regional
Transportation Authority taken as a whole. The accompanying
supplemental information, as listed in the table of contents,
is presented for purposes of additional analysis and is not a
required part of the financial statements of the Regional
Transportation Authority. This supplemental infoirmation is
the responsibility of the Authority's management. Such
information has been subjected to the auditing procedures
applied in our audit of the basic financial statements and, in
our opinion, is fairly stated in all material respects when
considered in relation to the general purpose financial
statements taken as a whole.

The statistical data, as listed in the table of contents, is
presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such
information has not been subjected to the auditing procedures
applied in the audit of the basic financial statements and,
accordingly, we express no opinion on such statistical data.

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10

REGIONAL TRANSPORTATION AUTHORITY

NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1990

NOTE 1 - REPORTING ENTITY

The Regional Transportation Authority (RTA) was established in 1974 upon the approval of a
referendum in its six-county Northeastern Illinois region. The operating responsibilities of the RTA
are set forth in the RTA Act. The RTA is a unit of local government, body politic, political
subdivision and municipal corporation of the State of Illinois. As initially established, the RTA was
an operating entity responsible for providing day-to-day bus and rail transportation services.
However, in 1983 the Illinois General Assembly reorganized the structure and funding of the RTA
from an operating entity to a planning and oversight entity. The reorganization placed all operating
responsibilities in the Chicago Transit Authority (CTA) and two operating divisions of the RTA: A
Commuter Rail Division ("Metra"), and a Suburban Bus Division ("Pace"), each having its own
independent board. These divisions conduct operations and deal with subsidized carriers.

The RTA Act sets forth detailed provisions for the allocation of receipts by the RTA to the various
Service Boards, and imposes a requirement that the RTA's system as a whole achieves annually a
"system generated revenue recovery ratio" (i.e., aggregate income for transportation services
provided) of at least 50% of the cost of the transportation services. The Service Boards achieve
their required recovery ratio by estabUshing fares and related revenue to cover the required
proportion of their proposed expenses. The RTA has the responsibility to supervise the budgets
and financial condition of the CTA, Metra and Pace.

Governmental accounting and financial reporting standards as estabUshed by Statement 3 and
Interpretation 7, "Defining the Governmental Reporting Entity," issued by the National Council of
Governmental Accounting and adopted by the Govemmental Accounting Standards Board, require
disclosure in the notes of govemmental financial statements of the results of applying Statement 3
and Interpretation 7 criteria to specific affiliated organizations. The assets, liabilities, revenues, and
expenditures (or expenses as appropriate) of all affiliated organizations determined under Statement
3 and Interpretation 7 to be part of a govemmental reporting entity generally must be included on
the face of its financial statements. Thus, it is necessary to determine whether Metra, Pace and the
CTA are part of the RTA Statement 3 and Interpretation 7 reporting entity.

The basic Statement 3 and Interpretation 7 criteria for determining whether an affiliated
organization is part of a govemmental reporting entity is the exercise of oversight responsibility.
Statement 3 and Interpretation 7 set forth various manifestations of oversight responsibility
(responsibility for financing deficits, entitlements to surpluses, guarantees of "moral
responsibility" for debt, selection of goveming authority, designation of management, ability to
significantiy influence operations, accountabiUty for fiscal matters, etc.) which indicate that an
affiliated organization should be included within the Statement 3 and Interpretation 7 reporting
entity.

Statement 3 and Interpretation 7 provide that an affiliated organization generally should be included
within a govemmental reporting entity, regardless of the degree of oversight responsibility, if its
activities are (1) for the benefit of the reporting entity and/or its residents, (2) conducted within the
geographic boundaries of the reporting entity, and (3) generally available to the citizens of the
reporting entity.

11

In the judgement of RTA management and with the concurrence of the RTA's auditors, analysis
and application of Statement 3 and Interpretation 7 criteria indicates that, while the RTA does
exercise some fiscal oversight, Metra, Pace and the CTA are not part of the RTA reporting entity
for purposes of preparing a comprehensive annual financial report in accordance with
governmental accounting and financial reporting standards. Accordingly, financial statements for
Metra, Pace and the CTA are not included or combined with the RTA's financial statements in this
report. They are combined, however, in the Pro Forma Combining Annual Financial Report. The
Pro Forma Combining Annual Financial Report is a statutorily required report and is not required
under governmental accounting and financial reporting standards.

In arriving at this conclusion, the following factors were considered:

• The CTA, Metra and Pace maintain separate management, exercise control over all
operations (including the passenger fare structure), and are accountable for fiscal matters
including: ownership of assets, relations with federal and state transportation funding
agencies that provide financial assistance in the acquisition of these assets, and the
preparation of operating budgets. The CTA, Metra and Pace are also responsible for the
purchase of services and approval of contracts relating to their operation.

• Except for the Chairman of the CTA Board of Directors who is also an RTA Board member,
the boards of directors of each service division are completely independent of the RTA
Board. The RTA Board has control neither in the selection nor appointment of any Service
Board director nor of any of its management. Further, directors of the CTA, Metra, and
Pace are excluded from serving on more than one entity's board of directors, including that
of the RTA.

• Metra, Pace and the CTA provide services to different geographic areas within the six
county region. Metra provides transit service to the six county area with the majority of the
transit riders residing in the suburban metropolitan area and commuting into the City of
Chicago. Pace's primary service area is the suburban communities with limited service to
areas within the City of Chicago. The CTA provides service to the City of Chicago and
thirty-eight neighboring suburbs within Cook County. Although programs are underway to
increase the transfer of ridership between the service entities, trips of this type presently
represent a minority of those taJcen.

NOTE 2 - SUMMARY OF SIGNIHCANT ACCOUNTING POLICIES

The accounting policies of the RTA conform to generally accepted accounting principles as
applicable to governments. The following is a summary of the significant policies:

A. Fund Accounting

The accounts of the RTA are organized on the basis of funds and account groups, each of
which is considered a separate accounting entity. The operations of each fund are accounted
for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund
equity, revenues, and expendimres or expenses, as appropriate. RTA resources are allocated
to and accounted for in individual funds based upon the purposes for which they are to be
utilized and the means by which spending activities are controlled. In the financial
statements, the various funds are grouped into three broad fund types and five generic fund
categories as shown below.

12

GOVERNMENTAL FUND TYPES

RTA governmental fund types consist of the General Fund, Debt Service Fund and Capital
Projects Fund. The measurement focus is based upon determination of changes in financial
position, rather than upon income determination.

General Fund

The General Fund is the general operating fund of the RTA. It is used to account for all
financial transactions that are not specifically required to be accounted for in another
fund.

Debt Service Fund

Debt Service Funds are used to account for the accumulation of resources for, and the
payment of, general long-term debt principal, interest and related costs. The RTA
general ordinance also established a Debt Service Reserve Fund to be maintained by the
Trustee for the sole benefit of the holders of bonds, and to be applied and used solely for
the payment of bond principal and interest. The Debt Service Funds and the Debt Service
Reserve Fund are combined for financial statement presentation.

Capital Projects Fund

The Capital Projects Fund was established when 1990A Bonds of $100 million were
issued in 1990 for capital projects of the Service Boards. The proceeds will be allocated
by the RTA as follows: 50% for capital projects of the CTA; 45% for capital projects of
Metra; and 5% for capital projects of Pace. Projects included in any approved five-year
capital program will be eligible for reimbursements by the RTA without further review
or action by the RTA Board of Directors.

PROPRIETARY FUND TYPE

Proprietary funds are used to account for activities that are similar to those found in the
private sector and to account for the financing of goods or services provided by a department
or agency to other departments or agencies of the governmental unit, or to other
governmental units on a cost reimbursement basis. The RTA has one proprietary (internal
service) fund which relates to the activities of the Joint Self-Insurance Fund.

Joint Self-Insurance Fund

The purpose of the Joint Self-Insurance Fund is to provide a source from which to pay
substantial damage and other claims incurred by the Service Boards and the RTA and
arising out of personal injuries, property damage and certain other losses. The Self-
Insurance Agreement provides that the Joint Self- Insurance Fund is not available to pay
principal or interest on the Series 1986A Bonds which were issued to establish the Joint
Self-Insurance Fund.

To date, the Fund has made one payment in 1990 and has an additional reserve
established for a potential claim. These amounts are also recorded as receivables to the
Fund because the Fund wUl be reimbursed by the related Service Board. These claims,
as well as existing unsubmitted claims and incurred but not reported reserves, have been
recorded on the books of the Service Boards.

13

FroUCIARY FUND TYPE

Fiduciary funds account for assets held by a governmental entity in a trustee capacity or as
an agent for others. The RTA's fiduciary fund consists of an Agency Fund. Because agency
funds are custodial in nature (assets equal liabilities), they do not involve the measurement
of results of operations.

Agency Fund

The Agency Fund records the receipt and disbursement of the Retailers' Occupation and
Use Tax (sales tax) and the interest on this tax due to the CTA, Metra and Pace.
Required sales tax revenues are accrued in the Agency Fund and are equally offset by a
liability to the Service Boards. For purposes of the budget, additions to and
disbursements from the Agency Fund are considered to be revenues and expenditures,
respectively. In accordance with generally accepted accounting principles for
governmental entities, these are additions to and deductions from Agency Fund assets
and liabilities, respectively.

B . Fixed Assets and Long-Term Liabilities

Account groups are used to establish accounting control and accountability for fixed assets
and long-term liabilities. Account groups are not funds and, therefore, are not involved in
the measurement of the results of operations. The following are the RTA's account groups:

General Fixed Assets Account Group

Fixed assets used in govemmental-fund-type operations are accounted for in the General
Fixed Assets Account Group, rather than govemmental funds. Depreciation is not
recognized in accordance with standard govemmental accounting practices. General
fixed assets are acquired for the purpose of providing govemmental services at the RTA
and not for the production of services that are sold.

General Long-Term Debt Account Group

Long-term liabilities expected to be financed from govemmental funds are accounted for
in the General Long-Term Debt Account Group. RTA use of this account group relates
to bonds sold in 1986 to establish a Joint Self- Insurance Fund for transit operations and
bonds sold in 1990 to estabhsh a capital projects fund.

The entire liability for compensated absences is recorded in the General Fund, since,
with the exception of an immaterial amount, these will be liquidated with currently
available resources.

C . B asis of Accounting

Basis of accounting refers to when revenues and expenditures or expenses are recognized in
the accounts and reported in the financial statements, regardless of the measurement focus
applied.

14

All governmental funds and the Agency Fund are accounted for using the modified accrual
basis of accounting, i.e. revenues are recognized when they become measurable and
available, and expenditures are recognized when the related fund liabiUty is incurred. Sales
taxes are considered measurable when levied by the State and collected by the retailer. Sales
taxes are considered available when received in time to finance current obligations. Sales tax
revenues are recorded when they are both measurable and available.

Proprietary funds are accounted for using the accrual basis of accounting. Therefore,
revenues are recognized when earned and measurable, and expenses are recognized when
they are incurred.

D. Assets, Liabilities and Fund Equity

ASSETS

Cash and Investments

All excess General Fund cash is invested and earnings are credited to the General Fund
for use in financing general RTA operations. (A detailed analysis of cash and
investments is presented in Note 6).

Receivables

Accounts receivable include amounts due from local and state governments for sales
taxes and specific programs and projects.

Restricted Assets

Proceeds from debt and amounts set aside for payment of proprietary fund general
obligation debt are classified as restricted assets since their use is limited by bond
indenture.

Fixed Assets

General fixed assets are acquired for the purpose of providing governmental services at
the RTA and not for the production of services that are sold. When purchased, such
assets are recorded as expenditures in the General Fund and capitalized in the General
Fixed Assets Account Group. All fixed assets are valued at historical cost or estimated
historical cost if actual historical cost is not available.

LIABILITIES

Accrued Operating Assistance and Capital Assistance Payable

These amounts represent the accrued financial assistance and capital grants due to the
Service Boards at December 31, 1990.

Accrued Other Expenses

These amounts represent short-term payables accrued at year-end. Compensated
absences which are reported within this category represent the liability for employees'
vested vacation at year-end.

15

FUND EQUITY

Fund Balance

Portions of the fund balances of the general and debt service funds are reserved by the
RTA for specific purposes as follows:

Reserved for 1987 and prior budgeted capital and Reserved for 1988 thru 1990
budgeted capital represent that portion of the RTA's fund balance to provide the
local share of federal and state funded capital projects and to fund those projects
not funded by another source. The related cash to cover projects for, and prior to,
1987 has been restricted by RTA Board action.

Reserved for debt service represents the portion of fund balance for debt service
resources legally restricted for the payment of long-term debt principal and interest
amounts maturing in future years.

Contributed Capital

Contributed capital is the amount of permanent fund capital contributed to the Joint
Self- Insurance Fund fi-om the proceeds of the bond issue and includes deposits made
directiy to the fund since its inception.

E. Revenues

The RTA has four principal sources of revenue and other financing sources: (1) retailers'
occupation taxes, service occupation taxes, and use taxes (collectively, "Sales Taxes"); (2)
funds appropriated to the RTA by statute through the State's Public Transportation Fund
established under the RTA Act (the Act); (3) funds in respect of state or federal grants,
loans, or any other such funds, which the RTA is authorized to apply for and receive under
the Act; and (4) investment income on unexpended funds held by the RTA.

Intergovernmental grant revenues are recognized when qualifying expenditures have been
incurred in accordance with the grant award.

TAXES

The RTA Sales Tax curendy imposed by the RTA consists of (i) in Cook County, (a) a tax
of 1% of the gross receipts from sales of drugs, certain medical supplies and food prepared
for consumption off the premises (other than for immediate consumption) imposed on all
persons selUng tangible personal property at retail (a "Food and Drug Tax") and (b) a tax of
.75% of the gross receipts from all otiier taxable retail sales; (ii) in counties within
Northeastern Illinois other than Cook County, a tax of .25% of the gross receipts from all
taxable retail sales (together with (i) (b), a "General Sales Tax"); and (iii) a tax of .75% on
the use in Cook County, and .25% on the use in Northeastern Illinois other than Cook
Coimty, of tangible personal property purchased from a retailer outside Northeastern Illinois
and titled or registered with a State agency by a person with a Northeastern Illinois address
(a "Use Tax"). The taxes described in (i) and (ii) above are also imposed on persons
engaged in making sales of services pursuant to which tangible personal property or real
estate (as incident to a sale of a service) is tranferred (with respect to the taxes in (i) and (ii),
a "Service Occupation Tax").

16

The RTA Sales Tax is collected by the Illinois Department of Revenue (the "Department of
Revenue"), and paid to the Treasurer of the State of Illinois to be held in trust for the RTA
outside the State Treasury. Proceeds from the RTA Sales Tax are payable monthly, without
appropriation, by the State Treasury on the order of the State Comptroller direcdy to the
RTA.

Also, proceeds from certain sales taxes imposed by the State are allocated to the RTA as part
of the restructuring of the State and local sales taxes in Illinois. Until January 1, 1990, the
General Sales Tax, Use Tax and Service Occupation Tax portions of the RTA Sales Tax
were imposed at a rate of 1% in Cook County. Effective January 1, 1990, as a result of
legislation (the "Sales Tax Reform Act") aimed at simplifying the base and rate structure of
taxes imposed by the State and its local governments, including the RTA, the State General
Sales Tax, State Use Tax, State Service Occupation Tax and State Sewice Use Tax were
increased from 5% to 6.25% and any corresponding portions of the RTA Sales Tax in Cook
County were reduced from 1% to .75%. In order to avoid a revenue loss to the RTA
because of the reduction in titis portion of the RTA Sales Tax, the Sales Tax Reform Act
directed that portions of the receipts from the State General Sales Tax, State Use Tax, State
Service Occupation Tax and State Service Use Tax be paid to the RTA annually.

Specifically, 4% of the net monthly revenue from the 6.25% State General Sales Tax and
State Service Occupation Tax and 4% of the net monthly revenue from die State Use Tax on
personal property purchased at retail outside the State but registered or tided with a State
agency within the State (i.e., .25% of total) is tranferred into the County and Mass Transit
District Fund in the State Treasury (the "CMTD Fund"). The amount in the CMDT Fund
attributable to taxable sales occurring in Cook County or to property registered or titled in
Cook County is then transferred into the RTA Occupation and Use Tax Replacement Fund
in the State Treasury (the "Replacement Fund"). In addition, (i) the net monthly revenue
from the State Use Tax and State Service Use Tax portions of the 1% State Food and Drug
Tax and (ii) 20% of the net monthly revenue of the 6.25% State Use Tax and State Service
Use Tax (i.e., 1.25% of total), other than revenues of such taxes attributable to personal
property purchased at retail outside the State but registered or tided with a State agency
within the State, are deposited in the State and Local Sales Tax Reform Fund (the "Reform
Fund"). Ten percent of the money paid into the Reform Fund is then transferred into the
Replacement Fund.

The Act provides that the RTA withhold 15% of die tax revenues generated and that these
revenues are deposited into the RTA's General Fund. The RTA is required to pass on to the
Service Boards, pursuant to statutory formula, an amount equal to the remainder of such tax
revenues. The remaining 85% of sales tax is allocated to the Service Boards as follows:

Collected Within Collected in DuPage,

Service Collected Witiiin Cook County Kane, Lake, McHenry

Board Chicago Outside Chicago and Will Counties

CTA 100% 30%

Metra - 55% 70%

Pace - 15% 30%

The RTA recognizes as a receivable and revenue in the General Fund only the 15% of the
total sales taxes collected to which it is entided by the amended Act. The criteria applied for
recognition of the receivable and related revenue are that the amounts are "measurable and
available" for the RTA to meet its current obligations.

17

PUBLIC TRANSPORTATION FUND (PTF)

In accordance with the Act, the State Treasurer is authorized and required to transfer from
the State's general revenue fund to a special fund in the State Treasury designated the
"Public Transportation Fund" an amount equal to 25% of net revenues realized from sales
taxes (or, as the case may be, gasoline or parking taxes) imposed by the Board. These
amounts may be paid to the RTA only upon State appropriation. The State has approved an
appropriation from the PTF through its 1991 fiscal year which will end June 30, 1991.

None of the revenues from the PTF are payable to the RTA unless and until it certifies to the
Governor, State Comptroller, and Mayor of the City of Chicago that the RTA has adopted a
budget and financial plan as called for by the Act.

The amounts allocable to each of the Service Boards from funding received by the RTA
from the State's PTF are allocated at the discretion of the RTA Board in connection with the
review and approval of the annual and revised budgets of each Service Board. The allocable
amounts of such funds are payable as soon as may be practicable upon their receipt,
provided that the RTA has adopted a budget pursuant to Section 4.01 of the Act, and the
Service Board that is to receive such funds is in compUance with the budget requirement
imposed upon the Service Board pursuant to Section 4.1 1 of the Act.

FEDERAL OPERATING ASSISTANCE GRANT

A grant is provided to the RTA under Section 9 of the Federal Urban Mass Transportation
Act (UMTA). The revenue is recognized on the modified accrual basis in the year funds are
actually received based upon final approval of the grant. All funds received under this grant
are "passed through" to the Service Boards.

REDUCED FARE REIMBURSEMENT

The Legislature appropriated funds for a program under which the Illinois Department of
Transportation (IDOT) is authorized to provide to the RTA a reduced fare reimbursement
grant of $36 million for the purpose of reimbursing the Service Boards for actual revenue
losses attributable to reduced fares for students, handicapped persons and the elderly
covering a period between July 1, 1990 and June 30, 1991. The revenue is recognized on
the modified accrual basis when the amount is requested from the EDOT.

Expenditures and Expenses

Operating grants consist of financial assistance to the CTA, Metra and Pace. The RTA
provides operating assistance to the Service Boards to fund in part their RTA-approved
budgets.

Capital grants - local match are those portions of UMTA and IDOT funded capital projects
which are funded by the RTA as "local share" for the region.

18

Capital grants - 100% funded by the RTA are those items not funded by UMTA and/or
IDOT, but are completely funded by the RTA.

Metra excess sales tax represents sales tax funding due Metra based on the statutory formula
and budgeted sales tax revenues that is in excess of their budgeted operating deficit. These
funds are used by Metra for their capital program.

Administration consists of those costs of the RTA incurred to carry out its regional funding
and administrative activities. These costs were limited by statute to no more than $6,379,203
for 1990.

Non-Administration consists of those costs of the RTA which are exempt from the statutory
limit. These costs include the operation of the Travel Information Center; program and
capital development; and other costs incurred on behalf of the Service Boards.

G . Cash Flows

The Authority has adopted the provisions of the Governmental Accounting Standards Board
Statement No. 9, "Reponing Cash Flows of Proprietary and Non-Expendable Trust Funds
and Govemmental Entities That Use Proprietary Fund Accounting" in the financial
statements for the year ended December 31, 1990. For purposes of the statement of cash
flows, the Authority considers all Treasury Bills and Notes to be cash equivalents.

H . "Memorandum Only" Total Columns

Total columns on the Combined Statements are captioned Memorandum Only to indicate that
they are presented only to facilitate financial analysis. Data in these columns do not present
financial position, results of operations, or cash flows in conformity with generally accepted
accounting principles. Also, such data is not comparable to a consolidation. Therefore, inter-
fund eUminations have not been made in the aggregation of this data.

NOTE 3 - BUDGET AND BUDGETARY ACCOUNTING

Section 4.01(a) of the Act requires the RTA to prepare and adopt a comprehensive annual budget
and program presenting the RTA's planned operations and capital expenditures for the forthcoming
year. The budget is comprehensive and includes the activity in all funds except for the Capital
Projects Fund.

The annual budget and related appropriation are prepared on the modified accrual basis of
accounting in conformity with generally accepted accounting principles except for capital grants,
which are budgeted for on a project basis which normally exceeds one year, and debt service
payments which are budgeted as transfers from the General Fund. Expenditures may not exceed
budgeted appropriations except by RTA Board approval. All appropriations lapse at year-end.
During the year, several supplementary appropriations were passed. It is the poUcy of the RTA to
fund the budgets of the Service Boards, up to the amount appropriated in the annual Budget
Ordinance. The Service Boards shall maintain all financial records and shaU prepare all financial
statements and reports, including quarterly and annual reports required under the Act, in
accordance with the following provisions:

1 . The first source of funds to be credited against the budgeted funding amount is from UMTA
operating assistance grants;

19

2. The second source of funds to be credited against the budgeted funding amount is from 85%
sales tax receipts;

3 . The third source of funds to be credited against the budgeted funding amount is from PTF
receipts; and

4 . The fourth source of funds credited against the budgeted funding amount is from RTA 15%
and other discretionary receipts.

For capital expenditures, the payment of PTF funds, 15% funds and other discretionary funds of
the RTA shall be made under the terms and conditions of a grant agreement goveming such capital
expenditures.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

The RTA has various operating lease agreements for facihties and equipment. Operating lease
expenditures totaled $550,000 in 1990. Minimum annual rental payments by the RTA are as
follows:

Amount
Year (in thousands')

1991

$539

1992

575

1993

205

1994 and beyond

-0-

Total

$1,319

The RTA has no capital lease obUgations beyond 1990.

The building lease agreement provides that the RTA shall reimburse the lessor for any or all
additional expense attributable to the cost of operating and maintaining the premises that the lessor
may incur during the term of the lease agreement.

The RTA is a defendant or respondent in various lawsuits and administrative proceedings. A
Uability of $2.8 million has been recorded based on pending Utigation and claims filed against the
RTA. In the opinion of the RTA management, the ultimate resolution of these lawsuits will not
have a material effect on the RTA's fmancial position or its results of operations.

20

NOTE 5 - LONG-TERM DEBT

Changes during the year in long-term debt were as follows:

Long-term obligation

at December 31, 1989

New Issues in June, 1990

Current maturities
and retirements

Long-term obligation

at December 31, 1990

General

Obligation

1986A Bonds

$30,005,000

(3.640.000^
$26,365,000

General
Obligation
1990A Bonds

$100,000,000

$100,000,000

Total
$30,005,000
100,000,000

(3.640.000)

$126,365,000

1986 GENERAL OBLIGATION BONDS

On November 1, 1986, the RTA issued $40 million General Obligation Bonds, Series 1986A, to
establish a Joint Self- Insurance Fund for the RTA, CTA, Metra and Pace. The purpose of the Joint
Self-Insurance Fund is to provide a source fi-om which to pay substantial damage and other claims
above retained limits payable by any of the participants arising out of personal injuries, property
damage and certain other losses and damages. The Self-Insurance Agreement provides that the
Joint Self-Insurance Fund is not available to pay the principal or interest on the Series 1986A
Bonds.

The Series 1986A Bonds will mature on November 1 over a ten-year period and interest will be
payable at rates ranging from 4.0% to 6.2% on May 1, 1987 and semi-annually thereafter on
November 1 and May 1 in each remaining year.

Principal and interest requirements on the Series 1986A Bonds to maturity are set forth below:

Year

1991
1992
1993
1994
1995
1996

Total

Principal

$3,820,000
4,025,000
4,245,000
4,485,000
4,750,000
5.040.000

$26,365,000

Interest

$1,530,735

1,330,185

1,108,810

866,845

602,230

312.480

$5,751,285

Total

$5,350,735
5,355,185
5,353,810
5,351,845
5,352,230
5.352,480

$32,116,285

1990 GENERAL OBLIGATION BONDS

On May 1, 1990, the RTA issued $100 million General Obligation Bonds, Series 1990A, to
establish a Capital Projects Fund to provide the source of paying costs of the Capital Program for
the CTA, Metra and Pace.

21

The Series 1990A Bonds will mature on November 1 over a thirty-year period and interest will be
payable at rates ranging from 6.00% to 7.15% on November 1, 1990 and semi-annually thereafter
on May 1 and November 1 in each remaining year.

Principal and interest requirements on the Series 1990A Bonds to maturity are set forth below:

Year

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Total

Principal

Interest

Total

$1,095,000

$7,094,188

$8

189,188

1,160,000

7,028,488

8

188,488

1,230,000

6,957,728

8

187,728

1,310,000

6,880,853

8

190,853

1,390,000

6,798,323

8

188,323

1,480,000

6,709,363

8

189,363

1,575,000

6,613,163

8

188,163

1,680,000

6,509,213

8

189,213

1,790,000

6,395,813

8

185,813

1,915,000

6,274,093

8

189,093

2,045,000

6,141,958

8

186,958

2,185,000

6,000,853

8

185,853

2,340,000

5,847,903

8

187,903

2,505,000

5,682,933

8

187,933

2,685,000

5,505,078

8

190,078

2,875,000

5,313,100

8

188,100

3,085,000

5,103,225

8

188,225

3,310,000

4,878,020

8

188,020

3,550,000

4,636,390

8

186,390

3,810,000

4,377,240

8

187,240

4,085,000

4,102,920

8

187,920

4,380,000

3,808,800

8

188,800

4,695,000

3,493,440

8

188,440

5,035,000

3,155,400

8

190,400

5,395,000

2,792,880

8

187,880

5,785,000

2,404,440

8

189,440

6,200,000

1,987,920

8

187,920

6,645,000

1,541,520

8

186,520

7,125,000

1,063,080

8

188,080

7.640.000

550,080
$145,648,405

i

190.080

$100,000,000

$245

648,405

The Series 1986A and 1990A Bonds are general obligations of the RTA to which the full faith and
credit of the RTA are pledged. The Bonds are payable from all revenues and all other funds
received or held by the Authority (except amounts in the Joint Self-Insurance Fund and amounts
required to be held or used with respect to separate ordinance obligations), that lawfully may be
used for retiring the debt.

The Bonds are secured by an assignment of and lien on the sales taxes imposed by the RTA. All
sales tax receipts are to be paid directiy to the Trustee by officials of the State of Illinois. Any
amounts not needed to make the required monthly deposits for the Bonds or other Authority
obligations, or for deposit in the Debt Service Reserve Fund, are to be paid monthly to the RTA by
the Trustee.

2"?

Under the RTA Act, the CTA, Metra, and Pace's farebox receipts and funds on hand are not
available for payment of debt service.

In the Debt Service Fund, $5,132,546 is available to service the Authority's long-term debt as of
December 31, 1990. The remaining balance in this fund is reserved for interest payments.

NOTE 6 - CASH AND INVESTMENTS

The captions on the combined balance sheet related to cash and investments and the amounts in the
Total (Memorandum Only) column are as follows:

Deposits $ 11,162,417

Investments 293.252.490

Total Deposits & Investments $304,414,907

Deposits & Investments

Section 702.20(ii) of the RTA Act authorizes the Authority to invest any funds or monies not
required for immediate use or disbursement. The applicable statutory provisions governing the
investment of public funds are found in 111. Rev. Stat. Ch. 85, Sec. 901, et. seq.

The Authority passed an investment policy in November, 1987 which was revised in December,
1989 and May, 1990. This policy is in accordance with the Illinois statutes and allows the RTA to
invest in 1) certain obligations of the U.S. Government and its agencies; 2) interest- bearing
certificates of deposit, interest-bearing time deposits or any other investments constituting direct
obligations of any bank as defined by the Illinois Banking Act; 3) short term obligations of
corporations organized in the United States with assets exceeding $500 million and rated within the
highest classification established by at least two standard rating services; 4) certain money market
mutual funds; 5) State Treasurer's investment pool; 6) repurchase agreements; and 7) bankers
acceptances.

Deposits

At year-end, the carrying amount of the Authority's deposits was $1 1,162,417 and the bank
balance was $11,377,912. Of the bank balance, $10,911,562 was covered by Federal
Depository Insurance or collateral held by the Authority's agent in the Authority's name. The
remaining balance of $466,350 was uninsured and uncollateralized.

23

Investments

The Authority's investments are insured, collateralized, registered or are held by the Authority
or its agent in the Authority's name. The Authority held the following investments as of
December 31, 1990:

Inve§tment§

Carrying
Amount

Market
Value

Commercial Paper

$10,553,405

$10,700,000

U.S. Treasury Issues
Repurchase Agreement

221,625,842
61,073,243

226,386,880
64.126.905

Total Investments

$293,252,490

$301,213,785

NOTE 7 - FIXED ASSETS

The following is a summary of changes in the General Fixed Asset Account Group during the
fiscal year:

Balance Balance

1-1-90 Additions Retirements 12-31-90

Equipment $2,941,510 $1,939,923 $10,496 $4,870,937

NOTE 8 - DEFERRED COMPENSATION

The deferred compensation plan is an arrangement which permits RTA employees, on a voluntary
basis, to authorize a portion of salary withheld through payroll deduction. The deductions are
forwarded to the Plan Administrator for investment on behalf of the employees. Neither the amount
withheld nor earnings on the investments are subject to current federal income tax.

As of December 31, 1990, thirty-six RTA employees participated in the Plan. The Plan is
administered by a third party administrator and has a value of $520,000 and $647,000 for active
and inactive employees, respectively.

NOTE 9 - PENSION

The RTA participates, along with Metra and Pace, in a multi-employer noncontributory defined
benefit cost-sharing pension plan and trust (RTA Pension Plan and Trust), covering substantially
all employees not otherwise covered by a union pension plan. Responsibilities for administering
the Plan are divided among a Board of Trustees, a Retirement Committee, a Plan Administrator,
and the RTA Board of Directors. The Plan is classified as a "governmental plan" and is, therefore,
generally exempt from the provision of the Employee Retirement Income Security Act of 1974.
The Plan operates on a calendar fiscal year.

Separate employer contribution accounts were set up for the RTA, Metra and Pace. Contribution
expense is accrued by the RTA, Metra and Pace concurrent with the estabUshment of each
employer/employee account.

24

The Plan provides normal early retirement and disability benefits determined as a percentage of the
participant's average annual compensation in the three completed plan years of highest
compensation. Prior service credits are provided to participants employed prior to July 1, 1984
who were employed on a full-time basis prior to their employment with the RTA by another
governmental entity or by certain providers of transportation services. (Prior service credits for
participants employed after June 30, 1984 were eliminated with the 1984 amendments to the Plan).

Prior to July 1, 1979 contributions were made on the basis of non- actuarial estimates. The Plan's
initial actuarial study found that those estimates were in excess of actuarial requirements. As a
result, pension expense is being reduced by amortization of the excess over 20 years. (Prior to
1985, the excess was amortized over a ten year period).

Funding requirements for the Plan are made by an independent actuary. Assets are valued
recognizing a portion of both realized and unreaUzed gains and losses in order to avoid wide
swings in actuarially determined funding requirements from year to year. Certain directors and
persons hired after age 60 are allowed to participate in the Plan. 100% vesting occurs after five
years service and benefit accruals are provided for participants over age 65. An employee may
retire after age 55 and receive reduced benefits. There were no assets of the Plan included in the
RTA's financial statements.

As of the latest valuation date of December 31, 1989, actuarial assumptions related to interest
assume an 8% annual compounded rate of return on investments, and assumptions for salary
increases assumed a 6% compounded rate. This valuation is also based upon 737 active
participants in the Plan at December 31, 1989, of which 75 are employed by the RTA. The RTA
contribution allocation as determined by the Plan Administrator for 1990 was 10.48% of the
contribution requirements for all employers participating in the Plan. The total RTA payroll for the
year ended December 31, 1989 was $3.1 million; of this amount, $2.8 million represented
earnings of employees covered by the Plan. The contribution requirement for 1990 was $269,200
(9.6% of the 1989 covered payroll). During 1990, the RTA paid $197,100 (7.0% of the 1989
covered payroll) to the Plan.

The "pension benefit obligation" is a standardized disclosure measure of the present value of
pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in
the future as a result of employee service to date. The measure is the actuarial present value of
credited projected benefits and is intended to help users assess the RTA Pension Plan and Trust
funding status on a going concern basis, assess progress made in accumulating sufficient assets to
pay benefits when due, and make comparisons among public employee retirement systems and
employers. The Plan does not make separate measurements of assets and pension benefit
obligations for individual employers. The pension benefit obligation at December 31, 1989, (the
latest valuation available) for the Plan as a whole, determined through an actuarial valuation
performed as of that date, was as follows:

Total pension benefit obligation $25,028, 152

Net assets available for benefits (at cost) 24.280.263

Unfunded pension benefit obligation $747,889

Historical trend information showing the Plan's progress in accumulating sufficient assets to pay
benefits is available in the audited financial statements of the Plan for the year ended
December 31, 1989.

Tc;

NOTE 10 - INTER-FUND ASSETS/LIABILITIES
The amounts due from/to other funds are as follows:

Receivable Fund Payable Fund

General
General
Joint Self-Insurance

Total
NOTE 1 1 - DUE FROM METRA

Capital Projects
Joint Self-insurance
General

Amount

$59,601

1,178,450

66.379

$1,304,430

An agreement dated July 14, 1987 between the RTA and Metra stipulates that Metra would repay
the RTA the principal sum of $67.9 million in ten equal annual installments, without interest,
beginning December 31, 1988, with final payment due December 31, 1997. In September 1987,
Metra repaid RTA $11.8 miUion with the UMTA grants which were used to retire a portion of the
General Obligation Notes. The RTA forgave $3.9 million of this receivable and accordingly made
the corresponding balance of the General Obligation Note repayment with its own financial
resources. Metra repaid $6.79 million in January, 1989 and January, 1990, respectively. The
remaining receivable fi-om Metra at December 31, 1990 is $38.62 rnillion.

26

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31

Service Division Operating Characteristics

CHICAGO TRANSIT AUTHORTIY

• Serves the City of Chicago
and 38 neighboring suburbs

Rapid Transit

• 249

miles of track

• 143

stations served

• 1,216

rapid transit cars

• 1,968

daily train departures

• 12.2

million riders per

month

Motor Bus

• 133

bus routes

• 2,170

buses

• 35.2

million riders per

month

Paratransit

• 200 non-CTA owned private

operated vehicles

• 75 thousand riders p>er month

METRA

COMMUTER RAIL DIVISION

•1^00

miles of track

• 233

stations

• 135

locomotives

• 684

passenger cars

► 206

electric cars

. 3,652

trains operated per week

• 96.5%

on-time performance in 1990

• 6.0

million riders per month

PACE
SUBURBAN BUS DIVISION

Fixed Route

• 139

regular routes

• 86

feeder routes

• 200

communities served

• 98

commuter rail and rapid

transit stations served

• 515

vehicles in use during pe;

periods*

• 3.2

million riders per month

Paratransit

• 47 local services

• 154 Pace owned lift -equipped

buses in service

• 160 taxis and other non-Pace

owned vehicles in service

• 117 thousand riders per month

•Includes Contract Carriers

Allocation Of Capital Funds To Northeast Illinois

SECTIONS 3, 9 AND 23
(In Mhuons)

Federal

Fiscal

Year

Total
Awarded

Chicago

Transit
Authority

Commuter

Rail
Division

Suburban

Bus
Division

City of
Chicago

RTA

1981

$220.63

$100.47

$72.36

$19.80

$28.00

-0-

1982

204.85

109.05

89.10

6.70

-0-

-0-

1983

278.45

167.40

101.95

9.10

-0-

-0-

1984

269.96

157.90

76.56

35.50

-0-

-0-

1985

231.40

141.20

75.40

14.80

-0-

-0-

1986

237.36

141.45

77.20

18.19

-0-

$0.52

1987

243.30

142.90

84.20

16.20

-0-

-0-

1988

245.72

154.18

72.93

18.61

-0-

-0-

1989

270.17

165.89

84.34

19.94

-0-

-0-

1990

172.57

113.34

42.46

16.76

-0-

-0-

Total

$2,374.41

$1,393.78

$776.50

$175.60

$28.00

$0.52

32

System Ridership (in millions)

198M990
(In Miluons)

1000 n-

81 82 83 84 85 86 87 88 89 90

Unlinked Passenger Trips

LAST TEN CALENDAR TEARS
(In Millions)

Service Consumed:

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

CTA

Commuter Rail
Suburban Bus
Total
Percent Change

643.3 616.1 614.6

70.4 60.5 59.2

27.4 27.7 31.2

63S2

644.4

610.9

586.3

574.9

568.6

569.9

62.1

64.5

64.6

66.7

69.9

71.2

72.2

36.1

38.4

36.1

35.6

36.7

37.9

40.3

741.1

704.3

705.0

736.4

747.3

711.6

688.6

681.5

677.7

682.4

(9.3%)

(5.0%)

0.1%

4.5%

1.5%

(4.8%)

(3.2%)

(1.0%)

(.6%)

.7%

33

Legal Debt Capacity

1990

Legal Debt Margin:
Debt limitation per Act for General Obligations
Debt applicable to limitation:
1986A General Obligation Bonds
1990A General Obligation Bonds
Less: Amount available for repayment

Total debt applicable to limitation

Debt Margin for General Obligations

Debt limitation per Act for Working Cash Notes

Total Legal Debt Margin

51,000,000,000

$26,365,000

100,000,000

(5,132.546)

121,232,454

878,767,546
100,000,000

$978,767,546

Revenue Test:
Sales Tax must be 1 .5 times greater than debt service requirements
Revenues available must be 2.0 times greater than debt service requirements

Debt Service Requirements for 1990 were $8,847,594

1.5 X $8,847,594 = $13,271,391 vs. $444,111,009 of Sales Tax

2.0 X $8,847,594 = $17,695,188 vs. $664,974,446 of revenues available

34

8/4/2008
WT 140786 1 95 00

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